AI Drafter 
TaxTMI 
TaxTMI 
2025 (8) TMI 752
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....ASS. Notice u/s 143(2) issued on 16.08.2013 and thereafter, another notice u/s 142(1) were issued from time to time. The assessee has filed the replies as called for and finally, the assessment was completed at an income of INR 18,61,04,283/- by making additions on account of unexplained cash credits of INR 18,00,10,170/- and interest paid on such cash credit of INR 1,05,40,955/-. 3. Against this order, the assessee preferred appeal before Ld.CIT(A) who vide order dt. 29.01.2024, deleted the additions / disallowance made by the AO. 4. Aggrieved by the said order, Revenue is in appeal before Tribunal on the basis of following grounds of appeal- 1) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 18,00,10,170/- made by Assessing Officer u/s 68 of the Income Tax Act, 1961 in view of the fact that the assessee has failed to prove the creditworthiness of the Loan creditor for providing unsecured loan to the assessee and genuineness of the transactions"? 2) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,0....
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....k to the AO for verification and accordingly, prayed for the remand to the file of AO. 6. On the other hand, Ld.AR for the assessee vehemently supported the orders of Ld. CIT(A) and submits that during the year under consideration, the assessee received total amount of INR 10,70,00,000/- out of which INR 6,17,00,000/- were repaid however, there was an opening balance of INR 12,52,23,311/- therefore, the closing balance was remained at INR 18,00,10,170/- for which the addition was made. He further submits that in terms of provision of section 68 of the Act, the credits received during the year could only be considered and as submitted above, the total loan of INR 10,70,00,000/- received during the year only as against which the addition was made of INR 18,00,10,170/-. Thus, the addition should not be made in excess of the amount received during the year. With regard to three ingredients of section 68 of the Act viz. identity, genuineness of transactions and creditworthiness of the lender, Ld.AR submits that all the evidences were filed to establish identity, creditworthiness and genuineness of the transactions by filing confirmation, ledger account of the lender, bank statement, ....
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....and address of the lender- Refer pages 44 of PB; • Ledger account of the lender for the period 01.04.2011 to 31.03.2012 in the books of the assessee wherein all the transaction stands recorded with opening balance of Rs. 12,52,23,311 and closing balance of Rs. 18,00,10,170 - Refer pages 46 of PB; • Ledger account of the assessee in the books of Shri Rohit Jindal Prop. M/s Shree Balaji Steels alongwith confirmation wherein all the transaction stands recorded. On perusal of the same, it is clear that the assessee has in fact repaid outstanding loan to the extent of Rs. 6.17 crores during the year, while has only received Rs. 10.17 crore (not Rs. 18,00,10,170 as alleged by the assessing officer) - Refer pages 47 of PB; • Details of Interest on said loan booked in the books of the assessee alongwith the details of Tax deducted at source, challan of tax paid - Refer pages 48-49 of PB; • Copy of acknowledgment of income tax return filed by the lender for the assessment year 2012-13 declaring total taxable income of about Rs. 10.89 lakhs, audited financial statements of the lender for the year ending on 31.03.2012 - Refer page 53-58 of P....
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....e assessee. It is further seen that though there was a closing balance of INR 18,00,10,170/- of the unsecured loans taken from Shri Rohit Jindal however, the assessee had repaid a sum of INR 6,17,00,000/- to the lender. Since all the transactions were routed through banking channels therefore, genuineness of the transaction cannot be doubted. Ld. CIT(A) after considering the fact that the assessee has discharged the burden to prove the identity of the lender by filing its ITR and for establishing creditworthiness, the financial statement and bank statement submitted where the sufficient funds were available before making loan to the assessee. Under these circumstances, Ld. CIT(A) has deleted the additions made by the AO. The observations made by Ld. CIT(A) in para 5.2.1 to 5.2.9 are as under:- 5.2.1. "I have considered the Assessment Order and the judgements relied upon by AO, the Grounds of Appeal, the submissions made by the assessee, the Paper Book filed during the proceedings along with the various judgements relied on by the assessee. 5.2.2. It is noticed that the assessee has availed the Unsecured Loan from one Shri Rohit Jindal Prop. Shree Balaji Steels dur....
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....onsidering the entirety of facts, the Genuineness of transactions on these counts in my considered view can be accepted. 5.2.4 Coming to the Identity of the Loan Creditor Shri Rohit Jindal Prop. Shree Balaji Steels is engaged into Consignment Sales and Commission Agent of Stainless Steel Flats stated to be part of the Established Industrial Group. The Notice(s) and Summons are duly served and acknowledged. The Loan Creditor is conducting business operations through principal Bank Account No.01422320005504 maintained with HDFC Bank Ltd; Sandoz House, Worli, Mumbai-400 018 which shows substantial business transactions, which is fully disclosed to the department, regularly assessed to Income Tax, which is not disputed by Ld. AO at any point of time. The Loan Creditor has submitted vide letter dated 19.01.2015 the requisite information like PAN, Copy of Return of Income, Computation of Total Income, Copy of Ledger Account of the Assessee in their Books of Accounts for the period from April, 2011 to March, 2012, Copy of P&L A/c. and Balance Sheet as on 31st March, 2012, Copy of Tax Audit Report for the Asst. Year:2012-13 and Copy of Bank Statement extracted as on relevant dates....
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.... Statements filed from Page No.13 to 155 of the Paper Book, on each of the transaction day for the period of 16/02/2012 to 29/03/2012 loan advanced during the Financial Year 2011-12, which is tabulated as under: Date of Receipt of Loan Amount of Loan Received Bank balance on date of payment by lender Page No. of paper book showing the payment in the Bank Statement 16/2/12 2,00,00,000 7.48 crores 86 17/2/12 1,00,00,000 4.40 crores 88 18/2/12 75,00,000 3.41 crores 89 21/2/12 3,00,00,000 6.90 crores 93 22/2/12 1,00,00,000 4.58 crores 94 23/2/12 1,00,00,000 5.04 crores 96 24/2/12 1,25,00,000 5.89 crores 98 29/3/12 70,00,000 5.92 crores 148 Total 10,70,00,000 5.2.7. Therefore, the bank statement clearly establishes the creditworthiness of the Loan Creditor. The appellant on Page No.287 of Paper Book has further disclosed that the amount of Rs. 18,00,10,170/- the impugned cash credit assumed by AO, includes Opening Balance of Rs. 12,52,23,311/- as on 01.04.2011 and during the Financial Year 2011-12 the appellant has had availed only Loans aggregat....
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....tes to Share Capital which is non-refundable in its class and character. However, in the present case Unsecured Loan belongs to different class, repayable on demand in character, which has been squared up and repaid in the immediate succeeding year(s), which is accepted by the department. Therefore, the addition of Rs. 18,00,10,170/- on Unexplained Cash Credit u/s. 68 of Act is directed to be deleted on merits and case laws relied upon by the appellant. These Grounds Nos, 2 and 2.1 to 2.5of Appeal are allowed." 9. The perusal of the order of ld. CIT(A) revealed that the appellant has proved creditworthiness of the creditor by submitting its audited annual accounts along with relevant bank statements of the lender. The Assessing Officer has not proved that any cash was deposited prior to giving cheque to appellant. Further even though appellant was not required to prove sources of source, the bank statement submitted by appellant clearly reflects such sources which is not doubted by A.O. nor any inquiry has been made by A.O. for concluding that loan received by appellant is accommodative loan. The A.O. has not doubted the utilisation of such loan taken by appellant and such loan ....
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.... there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum received during the previous year; and the assessee offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression "the assessee offer no explanation" means where the assessee offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. It is true that the opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. 12. Coming to the facts of the present case in the line of the above proposition of law, f....
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....d that while making addition u/s 68 of the Act, the AO has doubted the financial capacity of loan creditor but such addition cannot be made on preponderance of probability and there has to be some evidence and substance in contention. The Assessing Officer has not brought anything on record to establish that the sources in the hands of loan creditor is non-genuine, rather the lender established that he is the consignment agents of Jindal Steel and always have large funds from the sale of consignment goods which were utilized for giving loan to the assessee. Merely because he has shown less income, loan taken by appellant from him cannot be held to be bogus or unexplained when the assessee has demonstrated that the lender has sufficient balance in the bank when the loan was given. It is well-settled position of law that no matter how strong suspicion is, it cannot take place of the evidence. Therefore, in the absence of any evidence showing that in fact, appellant has given cash in lieu of unsecured loan taken, merely on the basis of suspicion, no addition can be made for which reliance is placed on decision of Hon'ble Supreme court in the case of Daulatram Rawatmull (1964) 53 I....
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.... v. Copy of confirmation. Paper Book page no. 64. These documents were forwarded to the A for carrying out necessary enquiry with reference to the lender party. The Assessing Officer after conducting enquiries with reference to the lender party has submitted remand report vide his letter dated 2.03.2016 which was forwarded by the Addl. CIT, Range 2 vide his letter dated 08.03.2016. The relevant part of the remand report is submitted as under: "4. As per directions received, the submissions made by the assessee before your good self as well as additional evidence submitted by it for admission at the appellate stage have been carefully perused. Besides, the additional evidence furnished by the assessee has also been independently verified from this Office by way of issue of letter us 133(6) of the Income Tax Act, 1961, to the third party concerned, i.e., to Ms Fennie Commercial Private Limited, 96-AV9, Neelkanth Apartments, Kishan Ganj, Vasant Kunj, New Delhi - 110070. 5. The said party has furnished its detailed reply to the letter issued us 133(6) vide its letter dated 08.01.2016, which is placed on record. The said party has given the details of the....
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....ellant vide its letter dated 03.02.2014 during the course of the assessment proceedings in its case for AY 2011-12, it has furnished the name of Ms Fennie Commercial Private Limited, PAN AAACF9549A, from whom it had allegedly received unsecured loan of Rs. 3.60 crores whereas the said party is showing this Loan & Advance as "Share Application Money". It is seen from the remand report that Assessing Officer has carried out enquiry with the lender party us 133(6) of the I.T. Act. The said party furnished the detailed reply vide its letter dated 08.01.2016. It has been reported by the AO that Ms Fennie Commercial Pvt. Ltd. has confirmed that it has given share application money of Rs. 3.60 crore which has been accounted for by the appellant as unsecured loan in its balance sheet. The AO has also examined the ledger account of the appellant company from the lender party's books of accounts. The lender party has also filed copy of its return of income, audit report, balance sheet, profit & loss account and annexures. It has been observed by the AO from the annexures of the audit report that lender has shown loans and advances totalling Rs. 7,41,00,000/- in its balance sheet....
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.... of investigation report [In favour of assessee. Where assessee adduces evidence in support of share application monies, it is open to Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on report of investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between assessee and alleged hawala operators. Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by such applicants, confirmations by applicants for company's shares, certificates by auditors, etc., Assessing Officer was not justified in making addition under section 68 on account of share application money merely on general inference to be drawn from the reading of the investigation report. The least that Assessing Officer ought to have done was to enquire into matter by, if necessary, invoking his powers under section 131 summoning the share applicants or directors. b. Commissioner of Income-tax v. Mark Hospitals (P.) Ltd. [ 2015 ] 58 taxmann.com 226 (Madras) HIGH COURT OF MADRAS "S....
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....case of S. Hastimal v. CIT [1963] 49 ITR 273 (Mad.) and CIT v. Daulat Ram Rawatmull [1973] 87 IT 349 (SC). The learned first appellate authority has cited various decisions rendered by the hon'ble Supreme Court of India as well as the hon'ble jurisdictional High Court in the impugned order and finally has held that the assessee has substantiated the transaction regarding share application money received by it was genuine transaction and the same were not accommodation entries. He did not find any evidence collected by the Assessing Officer which could prove otherwise and deleted the additions in dispute. As regard the addition of Rs. 12,500 made on account of commission which was presumed to have been allowed by the assessee for obtaining the hawala entry in dispute, the learned Commissioner of Income-tax (Appeals) observed that the Assessing Officer was not able to bring anything on record that it was the assessee's own money which was routed in the form of share application money and has rightly deleted the same. 7. Keeping in view all the facts and circumstances, we are of the considered view that the learned first appellate authority has passed the impugned....
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....t was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Nova Promoters (supra), the Court has taken note of a situation where the complete particulars of the share applicants are furnished to the AO and the AO fails to conduct an inquiry. The Court has observed that in that event no addition can be made in the hands of the Assessee under Section 68 of the Act and it will be open to the Revenue to move against the share applicants in accordance with law. 5. In the facts and circumstances of the present appeals, the Court is satisfied that no substantial question of law arises. The appeals are dismissed." The facts of the above cited judicial pronouncements are identical with the facts of the appellant case, therefore, the ratio of the above cited judicial pronouncements is squarely applicable to the facts of the appellant case, hence, unsecured loan received by the appellant from M/s Fennie Commercial Pvt. Ltd. cannot be termed as unexplained income of the appellant and cannot be added u/s 68 of the I.T. Act. Therefore, the unsecured loan received from ....
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.... to make a personal appearance before the A.O. If the A.0. had any doubt about the material placed on record, which was largely bank statements or the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that its directors and shareholders or that of the sub-creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT v. Divine Leasing & Finance Etd (20092-229-178.268 (Delhi) and CIT v. Lovely Exports (P.) Ltd. 2006) 215 CTR 495 (SC).* 20. Further, the Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd. etc. in ITA. No.71 of 2015 dated 12th August, 2015 held as under : "The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the Assessing....